The Demise of Private Equity Is Greatly Exaggerated
May 01, 2015
PitchBook Dealmakers Column
In 1897 American author and humorist Mark Twain noted upon the publication of his obituary in the New York Herald that "reports of my death have been greatly exaggerated." The same can be said of recent articles proclaiming the demise of private equity. Such declarations, while headline-grabbing, mistake changing market structure related to regulatory policy with underlying fundamentals and the transformative role played by PE in the U.S. economy. PE will not only survive, it will continue to thrive in a global economy that remains in flux thanks to dynamic technology transformations and a continuation of above-trend growth.
Such erroneous analysis is typically rooted in a fundamental misunderstanding of the role PE plays in advanced economies, where it is critical in the creation of wealth and economic renewal. PE firms provide the mechanism and financial lubricant through which hidden value can be unlocked in financially troubled or very young firms. PE in this sense is a little like a coronary bypass; it alters the direction in which blood flows to the heart around distressed areas. The new artery created by the bypass results in a healthier patient, a longer life and new opportunities for growth.
For three reasons why PE will continue to thrive, read my blog by clicking here.